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Oil
IN the London Market, oil prices rose after militant attacks shut in a fifth of Nigeria’s oil supply. The US crude futures for March delivery CLcI raised $1.12 to $61.0 a barrel.
Nigeria’s oil exports have fallen by about 25 percent following militant attacks on oil production facilities and pipelines. Royal Dutch Shell has closed a total of 455,000 barrels a day of oil production in Nigeria, or about 19 percent of its output.
The fall in Nigerian oil output ahead of the March 8 meeting of oil ministers from the Organisation of the Petroleum Exporting Countries has reduced the prospect of the oil cartel cutting output at the meeting.
“Until last weekend, I would have said there was a good chance that Opec would cut output – now I am not so sure, with Nigerian oil exports falling so much,” said Adam Sieminski, global energy strategist at Deutsche Bank. Venezuela’s oil minister last week said he wanted the cartel to cut output by up to one million barrel per day, following the increase in oil inventories in the US and Europe.
Attacks on a gas pipeline at the weekend forced Nigeria to cut power generation by 30 per cent, the state power firm said. January attacks on a pipeline feeding key refineries have cut domestic fuel supplies and forced Nigeria to buy gasoline cargoes on international markets. The militants want more local control of the Niger Delta’s vast oil wealth. Nigeria is a key oil supplier to the United States, the world’s largest oil consumer.
The United Nations Economic Commission for Europe is among those striving for an international standard for measurement of energy reserves. To date, the closest to an internationally agreed standard has been the US Securities and Exchange Commission (SES), whose rules were set in the 1970s. Royal Dutch Shell famously fell foul of the SEC and was forced to downgrade its reserves in January 2004.
They say the SEC strictures can make it hard for companies to get funding from banks for much-needed exploration projects. Before the Shell debacle, Opec came under fire after many of its members upgraded reserves estimates in the 1980s when Opec quotas were decided on the basis of how much oil a country had.
Opec countries, nearly all of which are pumping to capacity, are no longer concerned with vying for production allocations. Even for oil companies, seeking to satisfy shareholders, the size of reserves estimates is not necessarily paramount.
Traders said the 25 per cent in Nigerian oil exports had effectively led to a cut in Opec supplies. It is expected to affect US oil imports next month, as the world’s largest oil consumer is one of the biggest buyers of Nigerian oil crude.
Supply disruption in Ecuador, South America’s fifth-largest oil producer, also added to unease in the Oil market. Ecuador produced 530,000 barrels a day before the stoppages.
The country stopped pumping oil through its main private oil pipeline, which has a capacity of 450,000 b/d, because of local protests. This was a day after a brief outage to exports from Petroecuador, the state-owned oil company.
The IPE Brent for April delivery fell 96 cents to $60.64 a barrel in late afternoon London trade, on February 22 unwinding the 6 cents gain from the previous session. April West Texas Intermediate fell $1.19 to $61.55 a barrel in early afternoon trade on the New York Mercantile Exchange, reversing most of the $1.45 gain from the previous session.
Gold
IN the London market, gold prices moved to 10-day highs on February 20, supported by a rise in crude oil and a drop in the dollar. Other precious metals followed gold higher after tumbling in the previous week, with platinum rising nearly two percent and silver climbing to its highest in more than a week.
Gold XAU rose as high as $556.60 an ounce before easing to $554.50. Traders said physical demand was slow, while there was also little investment interest, as the New York futures market is closed on February 20 due to the President Day holiday. Earlier gold fell to a one-month low around $534 a week as the market consolidated after a steep correction from a 25-year high of $574.60 reached on February 2.
Asian and European players bought back metals as oil prices leapt after Nigerian rebels bombed pipelines and a major tanker terminal over the weekend, knocking out 19 per cent of supplies from the world’s eighth biggest crude exporter.
Gold is often seen as a hedge against inflation. The dollar stayed in tight ranges against the euro after falling earlier on February 20, with the US currency’s yield potential seen as a supportive factor even after mixed economic data late last week.
Major gold producers are increasingly finding it difficult to maintain production, much less increase it, as major ore deposits become more scarce and expensive. Gold Fields which produced 4.22 million ounces in its financial year to June 2005, has vowed to boost its overseas output by 1.5 million ounces by 2009. Lonmin produced 916.420 ounces of platinum in its financial year to September 2005 and aims for one million ounces in 2006.
